21.6.8. Split Spousal Assessments

(1) Employees in the Accounts Management (AM) organization respond to taxpayer inquiries and phone calls as well as process claims and other internal adjustment requests. Additional background information can be found in IRM 21.6.8.2, Split Spousal Assessments Overview.

(1) Delegated authorities and policy statements related to Accounts Management can be found in IRM 1.2.1, Servicewide Policy Statements. This IRM also references IRC 6103(e).

(1) The Accounts Management Director oversees the guidance provided to employees.

(2) A tax analyst in Accounts Management, Policy and Procedures, provides the content of this IRM.

(3) Managers and leads ensure employees follow the guidance provided in this IRM.

(4) Employees respond to and resolve taxpayers’ tax issues related to split spousal assessments following procedures in this IRM.

(1) Program Reports: The program reports provided in this IRM are for identification purposes for the Accounts Management Contact Representatives (CRs) and Tax Examiners (TEs) and Field Assistance Individual Taxpayer Advisory Specialist (ITAS). For reports concerning quality, inventory, aged listing, refer to IRM 1.4.16, Accounts Management Guide for Managers, for Accounts Management managers. Use Data Analysis, Project PCD, found on the Control-D/Web Access server, to access aged listings.

(2) Program Effectiveness: Program Effectiveness is measured and controlled through managerial and quality reviews.

(1) Goals, measures and operating guidelines are listed in the yearly Program Letter. Quality data and guidelines for measurement is referenced in IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax Exempt/Government Entities, RICS, and Electronic Products and Services Support.

(1) For a comprehensive listing of IRS acronyms, refer to the Acronym Database. Below are acronyms currently not listed in the database.

(1) Listed below are the related resources commonly shown in this IRM (list is not all inclusive):

• IRM 21, Customer Account Services

• IRM 3, Submission Processing

• IRM 5, Collecting Process

(1) MFT 31 modules established, or processed, between January 2001 and January 2005 were established as split/transfer modules.

(2) Split/transfer modules included transactions and balances for the liable spouse after the other was relieved, in full or in part, of the liability due to:

• Innocent spouse relief

• Bankruptcy discharge

• Accepted OIC

• Tax Court ruling

• Examination of the return

(3) Split/transfer modules were established after January 1, 2005, if the case was:

• Sent to the Accounting function for processing prior to January 1, 2005

• Open in Innocent Spouse inventory and one MFT 31 module was established prior to January 1, 2005

• Open in Examination prior to January 1, 2005

(1) MFT 31 modules established after January 1, 2005, were established as a mirrored module, except for Action Code 102 and 103, which are never mirrored. Master File programming for MFT 31 allows the systemic mirroring of the MFT 30 module.

(2) As of January 1, 2016, Master File programming for MFT 65 allows the systemic mirroring of the joint SRP MFT 35 module.

(3) The mirroring process systemically establishes two MFT 31 and/or MFT 65 modules. One for each spouse's TIN. Credits are systemically credited to the spouse's module.

(4) The following account conditions cannot be mirrored:

• Accounts with an Internal Revenue Service Number (IRSN) or an Individual Taxpayer Identification Number (ITIN) as the primary TIN. These accounts are moved to Non-Master File (NMF).

  Exception: ITINs with the 4th and 5th digits with the following ranges can be mirrored: 50-65, 70-88, 90-92 and 94-98.

• Accounts where the secondary SSN is invalid, unless the invalid condition is resolved.

• The module for the year of death of the secondary taxpayer.

(5) Payments with DPC 31 are not mirrored to the spouse's module.

(1) MFT 31 Exam / Appeals / AUR modules are created for one of the following:

• Restitution - an assessment of restitution is made pursuant to a court order in a criminal case.

• Tax Court - only one spouse requests to go to Appeals, petitions Tax Court, or signs an agreement with regard to a proposed tax adjustment.

• Bankruptcy - only one spouse has filed bankruptcy and the non-bankrupt spouse has defaulted.

• Innocent spouse - an innocent spouse claim is filed during open examinations.

(2) The modules are systemically established but not mirrored.

(3) These modules are identified by a TC 971 AC 102 or 103. Beginning March 23, 2011, Action Code 102 is used exclusively to create or identify restitution-based assessment MFT 31 modules.

(4) Since non-mirrored accounts do not reflect what is on the MFT 30 module, review the MFT 30 for interest-free periods, such as Rev. Rul. 99-40, statute extensions, etc. If the taxpayer is entitled to an interest-free period, manually compute the interest on MFT 31. See IRM 20.2.5, Interest on Underpayments.

(1) Research missing payments using normal procedures. See IRM 21.5.7, Payment Tracers.

(2) DPC 31 prevents the associated payment from being cross-referenced to the other related MFT 31 module. DPC 31 payments should not be manually mirrored.

(3) Use the following procedures to ensure payments are credited to the correct modules:

(1) Adjustments are input in the same manner as the MFT 30 and/or MFT 35 and will post without a TC 150 present.

(2) Adjustments are not mirrored, however, adjustments to refundable credits do mirror. See IRM 21.6.8.4.2.1, Mirrored Modules, for a list of transaction codes that are mirrored using a corresponding credit (TC 766 reference number 337). If necessary, input multiple adjustments, one on the primary spouse's module and one on the secondary spouse's module.

(3) The adjustment amount may vary for the primary and secondary taxpayer. Verify adjustment amounts before inputting the adjustment.

(4) Information input to MFT 31 is not transmitted to the Social Security Administration. Do not input reference numbers associated with Social Security or Medicare tax, or the income that produced the tax, such as self-employment or tip income, on MFT 31 modules. Input the necessary adjustment, without the reference numbers on the MFT 31 module(s). Changes to Social Security or Medicare tax, and the income that produced the tax, must be input on MFT 30. Input TC 290 .00, the appropriate reference numbers, RC(s) and HC 4 on the joint MFT 30 module. Forms / schedules related to these types of adjustments include:

• Schedule SE, Self-Employment Tax

• Schedule H, Household Employment Tax

• Form 4137, Social Security and Medicare Tax on Unreported Tip Income

• Form 8919, Uncollected Social Security and Medicare Tax on Wages

• Form 8959, Additional Medicare Tax

(5) Other reference numbers are not valid with MFT 31, such as First-Time Homebuyer Credit, see IRM 21.6.4.4.17.4, Manually Adjusting the Recapture Amount. CC ADJ54 will return error message "MSG 99 - REF-NUM EITHER INVALID OR NOT ALLOWED WITH MFT". If this message is displayed, input tax, credit, and other allowable reference numbers on MFT 31, then input the restricted reference numbers on MFT 30.

(6) When considering penalty abatement requests on MFT 31, if the facts and circumstances presented by one spouse clearly show it would apply to both spouses, remove the penalty on both modules.

(7) Adjustment requests for an MFT 31 module with action code 102 or 103 are generally referred to the originating function.

(8) Overpayments do not systemically generate a refund. The credit is held on the module and an REFMFT31 and/or REFMFT65 transcript generates, see IRM 21.6.8.6.2, REFMFT31 / REFMFT65 Transcripts. To prevent a transcript from generating, include Hold Code 4 when inputting an adjustment that will create an overpayment. Manually offset or refund the overpayment.

(1) Systemic refunds are issued in the primary taxpayer's name only. A manual refund must be issued when both the primary and secondary taxpayer’s names are required on the refund. If the overpayment is a joint overpayment, a manual refund must be issued.

(2) Multiple manual refunds must be issued if the joint overpayment:

• Includes a DPC 31 payment

• Is not entirely available on one module

  Caution: TC 766 credits with reference number 337 cannot be refunded. If the joint overpayment includes payments made by both spouses which are mirrored to the other spouse's module, the total amount of the joint overpayment is not available for refund from one module. The TC 766 portion of the overpayment must be reversed using TC 767. See the exhibits at the end of the IRM for examples.

(3) Ensure any payment being refunded was not mirrored to the cross-reference module. If mirrored, reverse the credit (TC 766 reference number 337).

(4) If it is necessary to issue a manual refund, follow the procedures in IRM 21.4.4, Manual Refunds, and:

1. Attach all required documentation and proof of research to the manual refund request.

   Note: Accounting will return a manual refund request that does not have the required information and/or documentation.

2. Issue the manual refund in the joint MFT 30 name line only if the overpayment is a joint overpayment.

3. Issue the manual refund with the name line of the MFT 31 and/or MFT 65 module if the refund is being issued to the individual.

   Example: Taxpayer A makes a payment which overpays the module. The overpayment is refunded in Taxpayer A's name only.

(1) DUPASMT transcripts generate when payments post to either spouse's non-mirrored MFT 31 module. This occurs when the MFT 31 was created by a TC 971 AC 102 — Exam Tax Court Case, prior to March 23, 2011, or AC 103 — Exam / AUR / Appeals Tax Court Case. If the module has a TC 971 AC 110, the transcript is issued after the posting of each subsequent payment transaction (TC 670, TC 706, etc.). The purpose of this transcript is to ensure each spouse's module is properly credited with a payment made towards a joint liability.

(2) Generally, DUPASMT transcripts will not generate on mirrored modules. Transcripts generated on mirrored modules are based on the TC 971 AC 110 Julian date. If the TC 971 AC 110 has Julian date 999, an REFMFT31 / REFMFT65 transcript will generate. If the TC 971 was manually input, the TC 971 AC 110 will have a Julian date other than 999 which triggers a DUPASMT transcript.

(3) The tax liability, in whole or in part, is reflected on both spouse's MFT 31 modules. The payment(s) must be reflected on both modules to assure proper balance due information and Accounts Receivable.

(4) Upon receipt of the transcript, research all related MFT 30 and/or MFT 35 and MFT 31 and/or MFT 65 modules (on both the primary and secondary TIN) to determine necessary actions as shown below.

(5) If research does NOT show an open control with category "REFM" or "REFA":

1. Compare the primary and secondary's tax modules.

2. Input TC 290 .00 to the spouse's module that does not have the payment(s) credited to their module.

3. Enter reference number 337 for the amount of the payment. Do not include any portion of the payment in the amount refunded.

   Caution: Do not create a credit balance when inputting reference number 337. If the payment amount is more than the balance due, input the balance due amount.

   Exception: If the credit being mirrored was received prior to an existing credit on the module, a credit balance can be created. However, you must resolve the credit balance to prevent a subsequent transcript.

4. Enter the Return Processable Date (RPD). The RPD is the posting date of the payment.

5. Use HC 3, RC 099, BS 05, and PC 9.

(6) When adjusting a statute year module and an entry is required in the "RFSCDT" field on CC ADJ54, use the IRS received date of the transcript with override code S.

(7) When the module is paid in full, input a TC 972 AC 110 on both modules to stop future transcripts from generating.

(1) REFMFT31 and REFMFT65 transcripts generate when the MFT 31 or MFT 65 module reflects an overpayment. A computer-generated TC 570 will post in the cycle the overpayment is created. The purpose of these transcripts is to ensure the overpayment shown on the module is a true credit, and not a "false credit" created by a mirrored payment, and thus subject to offset or refund.

(2) Control REFMFT31 transcripts using category code "REFM", REFMFT65 transcripts using category code "REFA".

(3) Upon receipt of the transcript, research all related modules (on both the primary and secondary TIN) to determine necessary actions as shown below.

(4) Perform a side-by-side comparison of the two modules to ensure all proper transactions (payments, credits, adjustments, etc.) are mirrored.

(5) If both MFT 31 modules are not full paid and all payments are not reflected on both modules, determine which payment(s) or portion of payment is missing from the module. Manually mirror the payment(s) following the steps below. If the payment(s) has a DPC 31, do NOT manually mirror the payment.

1. Input an adjustment to the spouse's module that does not have the payment.

2. Make a separate adjustment for each missing payment.

3. Input a TC 290 .00 and reference number 337 for the amount of the payment. Do not include any portion of the payment in the amount refunded.

   Caution: Do not create a credit balance when inputting reference number 337. If the payment amount is more than the balance due, only input the balance due amount.

   Exception: If the credit being mirrored was received prior to an existing credit on the module, a credit balance can be created. However, you must resolve the credit balance to prevent a subsequent transcript.

4. Enter the posting date of the payment as the RPD.

5. Use HC 3, RC 099, PC 9, BS 05.

(6) If the overpayment was created by a mirrored credit or a mirrored adjustment, research both modules to determine what type of transaction created the credit. Read this entire paragraph before taking action.

• If a mirrored credit created the overpayment, reverse the credit for the amount of the overpayment. Use separate reference numbers 337 for each credit causing the overpayment if multiple transactions have created the credit balance.

1. Input a TC 290 .00.

2. Enter the transaction date of the credit in the RET-PROC-DT field on CC ADJ54.

3. Input reference number 337 for the credit(s) creating the overpayment with a minus sign behind the money amount.

4. Use a HC 3, RC 099, PC 9, and BS 05.

• If after reversing the mirrored payment an overpayment still exists, continue with (6). Keep in mind the TC 290 input to reverse the mirrored credit will release the -R freeze. A HC 4 can be used to hold the credit.

• If the overpayment consists of credits from the MFT 30 module, such as withholding, it is a joint overpayment. The credit can only be refunded or offset once.

• If the mirrored credit or credit balance cannot be reversed from the mirrored module, move the credit to Excess Collections following the note in IRM 21.6.8.5.3(4), Refunds.

• If the mirrored credit corresponds with a refund offset, see (10).

(7) When the overpayment is a true overpayment, perform research to determine if the taxpayer is liable for other taxes.

1. If other balances are due, release the freeze and allow the credit to offset to the balance due module(s).

2. If you determine an offset will not occur in a normal manner, such as when certain freeze conditions exist, move the credit to the balance due module following normal credit transfer procedures.

   Note: If payment was intended for a taxpayer's MFT 31 and/or MFT 65 module, the credit can only be applied to a module for which the taxpayer is liable. The credit cannot be applied to a separate debt of the spouse's.

3. If research determines no additional balance is due, release the TC 570 freeze via normal freeze release procedures and allow the refund to generate to the taxpayer.

   Caution: A systemic refund can be issued for any payment(s) received after a mirrored credit. If the refund contains a payment prior to a mirrored credit (based on the transaction date, not the posting date), a manual refund must be issued, the system does not have the ability to generate a refund.

(8) When adjusting a statute year module and an entry is required in the "RFSCDT" field on CC ADJ54, use the IRS received date of the transcript with override code S.

(9) If the primary and/or secondary tax module has a TC 971 AC 110, input a TC 972 AC 110 to prevent future payments from mirroring. When inputting the TC 972, use the transaction date of the TC 971 AC 110.

(10) In situations where overpayments offset into both the primary and secondary modules creating a true credit and a false credit within 3 cycles of one another, ensure only the proper amount of tax, penalty and interest has been collected between the two modules. If necessary, reverse the overpayment offset, TC 706, instead of the TC 766. See Exhibit 21.6.8-4, Example: Refund Offset on Both Spouse’s Modules, TC 766 Generated on Both Modules, for an example of an offset that occurred one week apart.

(11) If it is necessary to issue a manual refund, follow the procedures in IRM 21.6.8.5.3, Refunds.